How to survive the big credit crunch

Will the crisis afflicting the world’s financial markets spread to the wider economy and affect us all?

Traders in the City have an adage: "Buy on the rumour, sell on the fact." Last Wednesday morning it appeared that everybody had heard the rumours but were not taking heed of the folklore.

The market should have been celebrating the previous night's cut in American interest rates, which had led to a rally on Wall Street, but instead the rumour mill went into overdrive.

A British bank was in trouble, the rumours said, and was turning to the Bank of England for emergency help. So serious was it that Mervyn King, the Bank's governor, had cancelled a trip to the Far East and ordered his staff to remain at their desks over the Easter holiday.

As soon as the market opened at 8.30am everybody was selling shares in Halifax Bank of Scotland (HBOS), Britain's biggest mortgage lender.